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Market Oracle FREE Newsletter

Trading Any Market

How Extreme Oversold Markets Can Be Profitable

Stock-Markets / Stock Markets 2016 Aug 26, 2016 - 10:05 PM GMT

By: Chris_Vermeulen

Stock-Markets

The trading week was starting to look as though it was going to end without any excitement. Wow, did that ever change on Friday!

On Wednesday Aug 24th, the stock market sold off to a level which I consider to be an extreme oversold condition for the week. While I do have several criteria as to why and how I come to the conclusion, the chart and indicator below show me when the market is oversold and ready for a bounce.


The green shaded areas on the bar chart are oversold extremes. Wed, Aug 24th the SP500 closed at this extreme. The following day the market struggled to find support but eventually did with the big pop in price on Friday.

You will also notice the red line indicator near the top of the chart. This is a little volume ratio I use to help confirm when the market is getting overbought and profits should be taken.

Second Oversold Confirming Indicator – Price Spike

Not only was the market oversold based on my proprietary indicator above, but the market also flashed us a post-market price spike. I have talked about these many times before and how it’s the market giving us insight into where the computers are likely to run the market or at least try to run the market in the next 48 hours. In less than two days the spike was filled for us to pocket another winning momentum trade.

Extreme Markets Conclusion:

In short, as traders we need to trade what see not think. It is easy to have market bias, meaning you want it to go in one direction and you favor your thinking and analysis that way. If you can completely avoid doing this, you will be highly profitable as a trader.

I see this time and time again, when the market gets oversold/overbought, or flashes us a price spike just before some news event. Its tough trading in front of pending news, but 80% of the time these moves play out just as expected.

The last big FED talk, gold flashed spike up a day before the news and it played out in a big way.  This week both the SPY and GLD spiked up a day before and both reached their spike targets Friday big fast profits. I will post the gold spike on my blog this weekend.

Follow my Analysis, Forecasts and ETF Trades at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 7 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

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